06/2004GTZ - ESSP1 Income and Expenditures of Business Chambers Structures Characteristics Opportunities Workshop on 18 & in Dambulla CCICP, CCIUP, CPWCIC, MDCCI, NCHSL, PAEA

06/2004GTZ - ESSP2 Income sources of chambers ServicesSubsidiesOthers Membership fees Income

06/2004GTZ - ESSP3 Membership fees ServicesSubsidiesOthers Membership fees Income Big Enterprises Small Enterprises Medium Enterprises

06/2004GTZ - ESSP4 Service ServicesSubsidiesOthers Membership fees Income Office Services Authorized Services Strategic Services Information Training Counselling Support

06/2004GTZ - ESSP5 Subsidies ServicesSubsidiesOthers Membership fees Income Govern- ment International Donors National Donors

06/2004GTZ - ESSP6 Others ServicesSubsidiesOthers Membership fees Income InterestOthersRent

06/2004GTZ - ESSP7 Expenditure structure 1 Expendi- ture 1 Lobby Auto- Organization Services

06/2004GTZ - ESSP8 Expenditure structure 2 StaffAll others Expendi- ture 2

06/2004GTZ - ESSP9 The Finance Structures Calculated by the Chambers

06/2004GTZ - ESSP10 Income sources of chambers Income ServicesSubsidiesOthers Membership fees CCICP (school) % CCIUP % CPWCIC % MDCCI % PAEA % NCHSL % Average %

06/2004GTZ - ESSP11 Income Membership fees Big Enterprises Small Enterprises Medium Enterprises Membership fees CCICP % CCIUP % CPWCIC % MDCCI % PAEA % NCHSL % Average %

06/2004GTZ - ESSP12 Income Service Services Office Services Authorized Services Strategic Services CCICP % CCIUP % CPWCIC % MDCCI % PAEA % NCHSL % Average %

06/2004GTZ - ESSP13 Income Subsidies Subsidies Govern- ment International Donors National Donors CCICP % CCIUP % CPWCIC % MDCCI % PAEA % NCHSL % Average %

06/2004GTZ - ESSP14 Expenditure structure 1 Expendi- ture 1 Lobby Auto- Organization Services CCICP % CCIUP % CPWCIC % MDCCI % PAEA % NCHSL % Average %

06/2004GTZ - ESSP15 Expenditures für Lobby and Service 100% 0% 100% 0% LobbyServices 20% 80% Service Organisation Business Club 20% CCICP CCIUP MDCCI PAEA CPWCIC NCHSL

06/2004GTZ - ESSP16 Expenditure structure 2 StaffAll others Expendi- ture 2 CCICP % CCIUP % CPWCIC % MDCCI % PAEA % NCHSL % Average % No staff.... No service !

06/2004GTZ - ESSP17 The Chamber as Business Club or Service Enterprise 100% 0% 100% 0% StaffOthers 30% 70% Business Club Service Enterprise 30% CCICP CCIUP MDCCI PAEA CPWCIC NCHSL

06/2004GTZ - ESSP18 1 Income from Membership Fees

06/2004GTZ - ESSP19 Membership Fees The total income from the memberships fees depend on Number of members Membership fee system Payment rate

06/2004GTZ - ESSP20 11 Number of members Do you want to increase the number of members? If yes, how?

06/2004GTZ - ESSP21 Logic of the Development of Chambers of Entrepreneurs Services Information / Consultation Training / Support Lobby in front of Government and other groups of the society Higher attractiveness for Entrepreneurs Law of great number: the more members, the more influence Chamber More Entrepreneurs apply for membership More members pay more membership fees More means to finance more and better services

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06/2004GTZ - ESSP28 12 Membership Fee System Considerations about the Membership Fee System of Business Associations and Chambers

06/2004GTZ - ESSP29 Criteria for a Membership Fee System l It must be "fair" l It must generate sufficient financial means to finance a big share of the costs of the lobby and service work of the business association

06/2004GTZ - ESSP30 What is "fair" ? l Membership fee system A : 1 member 1 vote 1 membership fee amount l Everyone pays the same amount ! The system is comparable with a "Poll Tax"

06/2004GTZ - ESSP31 l Under which conditions is this membership fee system efficient and fair? l All members are more or less equal è same size of the enterprises è same number of employees è same turnover and profit l In this case an identical amount as membership fee is fair, efficient and easy to manage

06/2004GTZ - ESSP32 l But what if the member enterprises differ very much ? è different size è different number of employees è different turnover and income l In this case the same membership fee is "unfair" and not efficient

06/2004GTZ - ESSP33 Example l The membership fee is for all members Rs per year è a bigger enterprise with 200 employees pays consequently 10 Rs per employee è a small enterprise with 5 employees pays consequently 400 Rs per employee l The burden through the membership fee is for the small company 40 times higher than for the bigger company !!!

06/2004GTZ - ESSP34 l This membership fee system has the effect of a barrier in order to keep out unwanted entrepreneurs, especially SMEs, from the business association l It is efficient for "Business Clubs" where selected "right" entrepreneurs want to remain among themselves

06/2004GTZ - ESSP35 What is "fair" ? l Membership fee system B: The membership fee amount reflects the economical differences between the members Bigger companies pay a bigger share Smaller companies pay a smaller share l The financial burden through the membership fee is more or less equal for all members

06/2004GTZ - ESSP36 The main questions … l Which criterion to use ? l How to define adequate categories ? (groups of member enterprises

06/2004GTZ - ESSP37 The problem … l The more complex the membership fee system is è criteria : reliable access to data and control è categories :many è exemptions : many the more difficult it is to manage and the more it invites the members to manipulate their data

06/2004GTZ - ESSP38 Criteria linked with the economic power of the member l Direct criteria è Turnover è Profit è Income tax payment … but entrepreneurs do not like to publish financial data … … therefore normally not recommendable! … in addition : during an economic crisis the income of the chamber can decrease dramatically …

06/2004GTZ - ESSP39 Criteria linked with the economic power of the member l Indirect criteria è Number of employees è In case of a sector association : - Quantity of production or - Quantity of sold products Usually not business secrets … therefore normally recommendable! The relatively stable employment of the enterprises guarantees a more secure income of the chamber

06/2004GTZ - ESSP40 Categories of members l A membership fee system without categories è x Rs per Rs turnover / profit or x ‰ from the turnover /profit è x Rs per employee l Advantage : è Very exact and fair l Disadvantage : è Causes much administrative work because of permanent changes of the data to be queried

06/2004GTZ - ESSP41 Categories of members l A membership fee system with categories è x Rs for turnover / profit up to a Rs y Rs for turnover / profit between b Rs and c Rs è x Rs for up to a employees y Rs for between b and c employees l Recommendation : è maximally 10 classes l Advantage : è Causes limited administrative work because the data do not vary that much

06/2004GTZ - ESSP42 Example for a membership fee system per number of employees Cate- gory Employees between FeeFee per employee max. – min Rs200 Rs – 50 Rs Rs100 Rs – 56 Rs 310 –191,000 Rs100 Rs – 53 Rs 420 – 392,000 Rs100 Rs – 51 Rs 540 – 794,000 Rs100 Rs– 51 Rs 680 –1598,000 Rs100 Rs– 50 Rs 7160 – 31916,000 Rs100 Rs – 50 Rs 8320 – 61932,000 Rs100 Rs – 50 Rs

06/2004GTZ - ESSP43 Differentiation between sectors l Perhaps it is necessary to differentiate between companies per sector è industry, agriculture, service è commerce è bank l They produce with the same number of employees considerable different economic results

06/2004GTZ - ESSP44 Example for a membership fee system per employees and sector Cate- gory Employees between Fee Industry Service Fee Commerce Fee Banks Rs1,000 Rs2,000 Rs Rs2,000 Rs4,000 Rs 310 –191,000 Rs4,000 Rs8,000 Rs 420 – 392,000 Rs8,000 Rs16,000 Rs 540 – 794,000 Rs16,000 Rs32,000 Rs 680 –1598,000 Rs32,000 Rs 7160 – 31916,000 Rs 8320 – 61932,000 Rs

06/2004GTZ - ESSP45 Registration fee l When is a registration fee reasonable è Members invest in costly infrastructure for their own benefit è A new member, who wants to use it, shall later adequately participate in its financing l Examples : è Social and sport clubs, i.e. tennis, golf, etc.

06/2004GTZ - ESSP46 Registration fee l What is the purpose of a registration fee of a business chamber or association è Except eventually an office building it does not have and need a costly infrastructure, because its tasks are lobby and service è It does not need a registration fee !!! l Registration fee charging chambers è Create an additional barrier around themselves è In order to keep entrepreneurs out !!!

06/2004GTZ - ESSP47 Registration fee l Consequently, a registration fee for new members is highly contra-productive for the development of a chamber !!! Note: In Europe, America and Africa chambers and associations do not know registration fees. Only on a small island in Asia …

06/2004GTZ - ESSP48 Some tricky points … one entrepreneur, more companies l In some countries entrepreneurs like to run a couple of smaller companies than one bigger one due to tax, organisational or marketing reasons. l As economically thinking persons they enter into the chamber only with one of these enterprises, preferably with the smallest one, using the lobby and service work for all of them. l Not good for the chamber! What to do?

06/2004GTZ - ESSP49 Some tricky points … one entrepreneur, more companies è The best : They enter with all individual companies into the chamber > more members, more fees è The 2nd best : They enter with all individual companies and get x% discount for the 2nd, y % for the 3rd, etc., company > more members, still more fees

06/2004GTZ - ESSP50 Some tricky points … one entrepreneur, more companies è The 3rd best : They enter with one company, but for the calculation of the membership fee the sum of employees of all companies is used > not more members, but more fees è The 4 th best : They enter with their biggest company, not with the smallest > not more members, little bit more fees

06/2004GTZ - ESSP51 Some tricky points … What is an "employee" ? l Especially in SMEs, but sometimes also in bigger companies, the question about the number of employees is sometimes unclear and difficult to answer : Who is counted as "employee"? l The answer can have a considerable effect on the chamber's membership fee income è (Observation: therefore, statistics often give a wrong image about the employment situation)

06/2004GTZ - ESSP52 Some tricky points … What is an "employee" ? Persons in the companyEmployee ? Entrepreneurno Family memberno Employee, monthly paidyes Worker, daily paidyes / no "Helper", apprentice, traineeyes / no Formally subcontracted persons but in reality dependent workers no

06/2004GTZ - ESSP53 Some tricky points … What is an "employee" ? l Therefore, it might be better to ask for the persons, working in the company inclusive è the entrepreneur è the family è monthly and daily paid employees and workers è apprentices, trainees, others è subcontracted persons working only for the company

06/2004GTZ - ESSP54 l All this means: è Chambers need a database with information about their members! è Which chamber does have such a member database? è If not, are the chambers interested in the development of a member database ?

06/2004GTZ - ESSP55 13 Membership Fee Payment Rate Members are hesitant to pay their membership fee. How to increase the payment rate?

06/2004GTZ - ESSP56 2 Subsidies

06/2004GTZ - ESSP57 Subsidies Govern- ment International Donors National Donors A subsidy is a volunteer payment from a donor to a chamber

06/2004GTZ - ESSP58 Workgroup l Which characteristics do subsidies have? l What does the donor expect from the chamber by paying a subsidy voluntarily? l Which advantages and disadvantages do subsidies have for the chamber? l Which are the differences between the subsidies from a government, a national and an international donor?

06/2004GTZ - ESSP59 Subsidies... l Easy money... l Limited for a certain time l Decreasing time Subsidy Own income

06/2004GTZ - ESSP60 Subsidies... Subsidies For the chamber development For the donor interests The chamber as consulting company

06/2004GTZ - ESSP61 Subsidies... l What means „dependency“ ??? è Financial dependency... è Political dependency...

06/2004GTZ - ESSP62 3 Services

06/2004GTZ - ESSP63 Services – what for? l To help the member in the è foundation è development è modernization è expansion of his / her enterprise l To support him / her in day-to-day activities

06/2004GTZ - ESSP64 Services and money For which services should the chamber charge a fee ? In general: for all ! Rule: Service and performance against payment Exception: Counselling, inquiries !!! The barrier to ask & discuss questions, doubts etc. should be as low as possible !!!

06/2004GTZ - ESSP65 31 Office Services

06/2004GTZ - ESSP66 Types of office services l Objective è To ease the day-to-day office work and communication of the entrepreneurs, who do not have the equipment and / or qualified staff for these tasks l Fax l l Internet use l Photocopies l Correspondence l Translations l ….

06/2004GTZ - ESSP67 What is needed for office services ? l Cost calculation l Price calculation = different prices for members and non-members l Qualified staff l Clear staff responsibilities (eventually with profit participation) l Active marketing

06/2004GTZ - ESSP68 Office Services l Advantages è Minimal equipment requirements è Can be introduced quickly è Users (members, non- members) must visit the chamber è Entrepreneurs become more aware of the chamber è Concrete service, easy to start and organise l Disadvantages è Relatively high administrative effort as compared to the volume of income

06/2004GTZ - ESSP69 32 Authorized Services

06/2004GTZ - ESSP70 Types of authorized services l Character è Public functions are delegated to chambers l Objective è To facilitate certain bureaucratic tasks the entrepreneurs l Certificate of Origin l Export documents l Etc.

06/2004GTZ - ESSP71 33 Training How to make money with training?

06/2004GTZ - ESSP72 Up-grading Training l Content è new technologies and specific knowledge l Target group è adults (entrepreneurs, employees) l Objective è to solve actual problems è to prepare for future developments l Duration è between 1 hour and 6 months l Needs è room, instructor (freelance) l Costs / earnings è low fixed, mainly current costs è earnings > costs

06/2004GTZ - ESSP73 Up-grading Training l Organization è Enterprises, professional training institutions (public and private), chambers and associations l Characteristics è short-term investment (weeks) è instant return è with profit making chances for enterprises è great flexibility (demand and supply) è Task of BDS providers and business chambers / associations

06/2004GTZ - ESSP74 The chamber up-grading training: a) The supply defines the program Member Enterprises Chamber Counsellor Up-grading trainer / instructor è The up-grading trainer offers the product / course to the chamber è He / she defines the program (content, methodology) è The chamber buys the defined product / course from the trainer è Counsellor’s task: organisation and management

06/2004GTZ - ESSP75 The chamber up-grading training: a) The supply defines the program l Success criteria for the chamber: è Number of participants è Financial surplus è Evaluation: The participants are content

06/2004GTZ - ESSP76 The ideology l “We BDS providers for entrepreneurs è up-grading training institutions and instructors l analysed the enterprises and detected problems and failures in certain areas..…, l we know what is good and necessary for the enterprises l and our product / course helps the entrepreneur to solve the problems è “Top down” Approach

06/2004GTZ - ESSP77 The chamber up-grading training: b) The demand defines the program è The Nucleus Entrepreneurs > define their problems and needs > decide about an activity to solve the problem (i.e. training course) è Counsellor‘s tasks: > to find in the market a qualified up-grading trainer > to check whether the trainer is able / willing to offer a product in reference to the defined demand (content, methodology) Chamber Up-grading trainer / instructor Counsellor Member Enterprises

06/2004GTZ - ESSP78 The chamber up-grading training: b) The demand defines the program è The up-grading trainer develops a product / course in reference to the defined problems / demand è Counsellor‘s tasks: organisation and management Chamber Up-grading trainer / instructor Counsellor Member Enterprises

06/2004GTZ - ESSP79 The chamber up-grading training: b) The demand defines the program l Success criterion for chamber and Nucleus è Almost all Nucleus entrepreneurs participate è Financial surplus è Evaluation: - The participants are content - Concrete impact on the development of the enterprises - The Nucleus asks for further training

06/2004GTZ - ESSP80 The Ideology l “We, the entrepreneurs l discussed and identified our problems and failures in the following areas..... l decided on the required training to address these problems l know what is good and necessary for us” è Subjective “bottom-up” analysis

06/2004GTZ - ESSP81 A comparison of some characteristics of up-grading training forms

06/2004GTZ - ESSP82 34 Events How to make money with events?

06/2004GTZ - ESSP83 35 Services for Members by Third Parties … eventually with kick back for the chamber

06/2004GTZ - ESSP84 The idea l Use of the “group” & purchase power of the total of the chamber in order to get products and services for decreased prices for the members è Entrepreneurs apply for membership in order to get the products & services for a lower price è Entrepreneurs can finance their membership fee with their saved money è Eventually kick back from the producer

06/2004GTZ - ESSP85 Examples l Insurances l Hotels & restaurants l Suppliers of certain goods l …. Save money through your chamber membership !!!

06/2004GTZ - ESSP86 Credit Scheme for Nucleus Entrepreneurs Discussion between Sanasa Development Bank & ESSP

06/2004GTZ - ESSP87 l The Sanasa Development Bank is interested in the Nucleus Approach and considers to start a special Nucleus Entrepreneurs Credit Scheme

06/2004GTZ - ESSP88 The interest of the participating parties l Nucleus entrepreneurs è Easy and fast access to credits for payable costs l Chambers è Attractive services in order to get more membership fee paying members so that it – improves its financial status; – increases its lobby power è Services which help the members to improve their enterprises è Income

06/2004GTZ - ESSP89 The interest of the participating parties l SDB è Access to new clients è Lower administration costs è High repayment rate of the loans è Profit è Fulfil its mission to contribute to the development of the economy l ESSP è Development of the economy through improving SMEs and chambers

06/2004GTZ - ESSP90 Conditions for a credit l The entrepreneur is a member of the chamber l Has paid his / her membership fee for the running calendar year l The entrepreneur is a member of the Nucleus for a minimum of six months l The Nucleus is considered “active” by the chamber

06/2004GTZ - ESSP91 Conditions for a credit l The entrepreneur participated during the last six months in a minimum of 50% of all activities of the Nucleus l The entrepreneur participated during the last three years in a business administration course / enterprise development training

06/2004GTZ - ESSP92 Product characteristics l Interest rate: Actually 9% (?) (better than for a normal individual entrepreneur) l Repayment period: è Working capital1 years è Building and land5 years è Equipment3 years è Services3 years l... Other conditions...

06/2004GTZ - ESSP93 Procedures l The chamber confirms the fulfilment of the conditions in written form. l The SDB disseminates the Nucleus Approach actively between their SME clients and motivates them to join them. l The chamber uses the credit scheme as a marketing instrument.

06/2004GTZ - ESSP94 Procedures l The chamber counsellor counsels and supports the Nucleus SMEs in the elaboration of credit applications and eventually in the negotiation with the SDB l But: The counsellor is biased in favour of the chamber members (he / she is paid by the chamber with the membership fees of the members and has the obligation to defend the interests of the SMEs)

06/2004GTZ - ESSP95 Procedures l In order to contribute to the costs of the chamber and to motivate / stimulate it to engage in a qualified form in the credit process the chamber gets from the SDB a certain fixed amount of Rs after the credit has been paid back successfully and without any problems.

06/2004GTZ - ESSP96 Procedures Credit amountChamber remuneration < 50,000 Rs500 Rs > 50,000 & < 500,000 Rs 1,000 Rs > 500,000 Rs2,000 Rs

06/2004GTZ - ESSP97 Interested ???

06/2004GTZ - ESSP98 l Enterprise Service Systems Promotion (ESSP) l elaborated by Amina Yoosuf Aruna Gunawardena Rainer Müller-Glodde